Q4 2023 American Express Co Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the American Express Q4 2023 earnings call.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session.

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You will hear a tone, indicating that you had been placed in Q you may remove yourself from the queue at any time by pressing Star then two if you are using a speakerphone. Please pick up the handset before pressing the numbers should you require assistance during the call. Please press Star then zero as a reminder, today's call is being.

<unk> recorded I will now turn.

The conference over to our host head of Investor Relations. Mr. Kartik from children. Thank you. Please go ahead.

Thank you Donna and thank you all for joining today's call as a reminder, before we begin today's discussion contains forward looking statements about the company's future business and financial performance.

These are based on management's current expectations and are subject to risks and uncertainties.

Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC.

Mr. Kartik: The discussion today also contains non-GAAP financial measures the comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for prior periods. We discuss all of these are posted on our website at IR Dot American Express Dot com.

Steve <unk>: We will begin today with Steve <unk>, Chairman and CEO, who will start with some remarks about the company's progress and results.

Steve <unk>: And then Christophe with Kayak Chief Financial Officer, who will provide a more detailed review of our financial performance.

Steve <unk>: After that we'll move to a Q&A session on the results with both Steve and Christophe with that let me turn it over to Steve.

Steve: Good morning, and thanks for joining US 2023 was another strong year for American Express we.

Christophe: We delivered record revenues of 61 billion for the year up 15% on an FX adjusted basis.

Christophe: We had record net income of over $8 billion with earnings per share of $11 21.

Mr. Kartik: In the fourth quarter, we continued to drive strong customer engagement and demand for our premium products.

Mr. Kartik: We had solid growth in billings and strong new account acquisitions and continued strength in credit quality, which remains the best in the industry. As a result, we achieved fourth quarter revenues of nearly $16 billion.

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q4 2023 earnings call. At this time, all participants are in a listen only mode.

Mr. Kartik: Which was another quarterly record and EPS was $2 62.

Mr. Kartik: Christoph will provide detail on our quarterly results, but I would like to take a step back to talk about what we've accomplished over the last two years until you why I'm feeling good about where we are today and why I am confident in our future.

Later we will conduct a question and answer session. If you wish to ask a question, please press star, then one on your touchtone phone. You will hear a tone indicating that you have been placed in queue. You may remove yourself from the queue at any time by pressing star, then two.

Christopher Brendler: Coming out of the Covid pandemic in January of 2022, we saw an opportunity to accelerate our growth and we set an aspiration to sustained growth over the longer term at levels that were higher than what we were achieving prior to the pandemic.

If you are using a speakerphone, please pick up the handset before pressing the numbers. Should you require assistance during the call, please press star, then zero. As a reminder, today's call is being recorded. I will now turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramchandran. Thank you. Thank you, Donna.

Christopher Brendler: At that time, we laid out a growth plan with the objective of positioning the company to be able to deliver on our aspiration of dry driving annual revenue growth of 10% plus and mid teens EPS growth over the long term.

Kartik Ramchandran: And thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discussed.

Christopher Brendler: In executing the plan, we focused on listening to our customers and understanding their needs and we invested in innovating our value propositions as well as uplifting, our marketing and technology capabilities and backing our colleagues to meet those needs.

Christopher Brendler: Looking back over the two years since we announced the growth plan I'm pleased to say that we achieved what we set out to do and in fact, we're ahead of where we thought we'd be on our journey. Thanks to the millions of premium customers, we have around the world and the American Express colleagues, who support them.

Christopher Brendler: Today, we are a larger and stronger company.

Mr. Kartik: Since 2021, we've delivered record annual revenues, increasing the scale of our business by over 40% in just two years from 42 billion to 61 billion in annual revenues.

Kartik Ramchandran: All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results, and then Christophe Lacayac, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Chris.

Mr. Kartik: And revenues annual card spending over this period has increased 37% on an FX adjusted basis to a record $1 five trillion we've.

Mr. Kartik: We've added about 25 million new proprietary card accounts over the last two years and over 70% of these new accounts are coming into the franchise on fee based products.

Mr. Kartik: With the growth in new accounts, we've seen over the past few years, we now have a total of over 140 million cards running on our global network.

Stephen J. Squeri: Good morning, and thanks for joining us. 2023 was another strong year for American Express. We delivered record revenues of $61 billion for the year, 15% on an FX-adjusted basis, and we had record net income of over $8 billion, with earnings per share of $11.21. In the fourth quarter, we continue to drive strong customer engagement and demand for our premium products. We had solid growth in billings, strong new account acquisitions, and continued strength in credit quality, which remains the best in the industry. As a result, we achieved fourth-quarter revenues of nearly $16 billion, which was another quarterly record, and EPS was $2.62.

Mr. Kartik: Our focus on continuously innovating our value propositions to meet the needs of our customers is driving increased brand relevance across generations, including millennial and Gen Z consumers.

Mr. Kartik: These customers represent over 60% of the new consumer accounts, we acquired globally in 2023, and 75% of new consumer platinum and gold accounts acquired in the U S came from this cohort.

Mr. Kartik: At the same time retention continues to be very high and our credit metrics remained strong and best in class.

Mr. Kartik: These strong results reflect the success of our strategic investments we've made in our business along with the tremendous earnings power of our business model.

Stephen J. Squeri: Christophe will provide detail on our quarterly results, but I would like to take a step back to talk about what we've accomplished over the last two years and tell you why I'm feeling good about where we are today and why I'm confident in our future. Coming out of the COVID pandemic in January of 2022, we saw an opportunity to accelerate our growth. And we set an aspiration to sustain growth over the longer term at levels that were higher than what we were achieving prior to the pandemic.

Christopher Brendler: Looking ahead, let me tell you why I feel really good about our future prospects.

Christopher Brendler: We have a business model that is delivering premium performance and we have strong momentum, which is driven by four key features of our model that differentiate us from the competition and are difficult to replicate.

Mr. Kartik: First our economic construct has a set of diversified revenue sources that include card fees spending and best in class lending.

Stephen J. Squeri: At that time, we laid out a growth plan with the objective of positioning the company to be able to deliver on our aspiration of driving annual revenue growth of 10% plus and mid-teens EPS growth over the long term. In executing the plan, we focused on listening to our customers and understanding their needs, and we invested in innovating our value propositions as well as strengthening our marketing and technology capabilities and supporting our colleagues to meet those needs. Looking back over the two years since we announced our growth plan, I'm pleased to say that we achieved what we set out to do, and, in fact, we're ahead of where we thought we'd be on our journey, thanks to the millions of premium customers we have around the world and the American Express colleagues who support them. Today, we are a larger and stronger company. Since 2021, we've delivered record annual revenues, increasing the scale of our business by over 40% in just two years, from $42 billion to $61 billion in annual revenue. Annual card spending over this period has increased 37% on an FX adjusted basis to a record $1.5 trillion.

Mr. Kartik: With our subscription like card fees being a core and fast growing component of our revenue mix.

Mr. Kartik: We have a singular focus on premium customers and superior innovative value propositions, our premium customers are high spending loyal and drive our strong credit performance.

Mr. Kartik: We have a large and growing partnership ecosystem that expands our brand value to card members and merchant partners around the world.

Mr. Kartik: And we have a global brand and a servicing ethos that truly sets us apart.

Mr. Kartik: Our business model provides us with strong competitive advantages and the way we've been able to leverage the model's unique elements and execute our strategy is strengthening those advantages, giving us the runway for continued continuing our momentum across generations geographies and both our consumer and small business customers.

Mr. Kartik: The power of our business model combined with the global scale of our premium customer base, the dedication and focus of our talented colleagues and the attractiveness of the many growth opportunities. We see ahead are the key reasons why I'm confident in our ability to continue on our growth plan.

Stephen J. Squeri: We've added about 25 million new proprietary card accounts over the last two years, and over 70% of these new accounts are coming into the franchise on fee-based products. With the growth in new accounts we've seen over the past few years, we now have a total of over 140 million cards running on our global network. Our focus on continuously innovating our value propositions to meet the needs of our customers is driving increased brand relevance across generations, including millennial and Gen Z consumers. These customers represent over 60% of the new consumer accounts we acquired globally in 2023, and 75% of new consumer platinum and gold accounts acquired in the U.S. came from this cohort. At the same time, retention continues to be very high, and our credit metrics remain strong and best in class. These strong results reflect the success of the strategic investments we've made in our business, along with the tremendous earnings power of our business. Looking ahead, let me tell you why I feel really good about our future prospects.

Mr. Kartik: And it's why going forward, we will remain focused on our long term aspiration of delivering annual revenue growth of 10% plus and mid teens EPS growth.

Mr. Kartik: We believe this aspiration is the right one and we aim to achieve it every year. However, we manage the company for the long term and we anticipate there'll be a range of potential outcomes in any given year due to a variety of factors such as external environment and actions, we might take that we decided our best for the business.

Looking at this year the continued momentum we've seen in the business as we've executed our strategy gives us confidence in our guidance for 2024, which is in line with our long term aspiration for the year, we expect to deliver annual revenue growth between nine and 11% and full year EPS of $12 65 to $13.

Mr. Kartik: <unk>.

Mr. Kartik: In addition, we plan to increase our quarterly dividend on common shares outstanding to 70 cents a share up from 60.

Mr. Kartik: Beginning with the first quarter 2024 dividend declaration this represents more than a 60% increase in the dividend from when we introduced our growth plan in January of 2022.

Stephen J. Squeri: We have a business model that is delivering premium performance, and we have strong momentum, which is driven by four key features of our model that differentiate us from the competition and are difficult to replicate. First, our economic construct has a set of diversified revenue sources that include card fees, spending, and best-in-class lending, with our subscription-like card fees being a core and fast-growing component of our revenue. We have a singular focus on premium customers and superior innovative value propositions.

Mr. Kartik: As always we will continue to run our business for the long term and we will do that by listening to our customers and meeting their needs through innovative unique value propositions and exceptional service that reflects our brand built on trust and security delivered and supported by a world class colleague base.

Christophe: In keeping our focus on backing our customers and our colleagues. We are confident that we will continue to deliver strong growth on a sustainable basis over the long term. Thank you and let me now turn it over to Christophe.

Stephen J. Squeri: Our premium customers are high-spending, loyal, and drive our strong credit performance. We have a large and growing partnership ecosystem that expands our brand value to card members and merchant partners around the world. And we have a global brand and a service ethos that truly sets us apart.

Christophe: Thank you, Steve and good morning, everyone Skip.

Christophe: It's good to be here to talk about our 2023 results, which reflect another strong year of performance and to lay out our expectations for 2024.

Christophe: I will discuss both our quarterly and full year results. This morning, since its CRM and since looking at our business on an annual basis is more in sync with how we run the company.

Stephen J. Squeri: Our business model provides us with strong competitive advantages, and the way we've been able to leverage the model's unique elements and execute our strategy has strengthened those advantages, giving us the runway for continuing our momentum across generations, geographies, and both our consumer and small business customers. The power of our business model, combined with the global scale of our premium customer base, the dedication and focus of our talented colleagues, and the attractiveness of the many growth opportunities we see ahead are the key reasons why I'm confident in our ability to continue on our growth path. And it's why, going forward, we'll remain focused on our long-term aspiration of delivering annual revenue growth of 10% plus and mid-teens EPS growth. We believe this aspiration is the right one, and we aim to achieve it every year.

Christophe: Starting with our summary financials on slide two.

Skip: Full year revenues reached an all time high of $60 5 billion up 15% on an FX adjusted basis.

Skip: Our fourth quarter revenues were $15 8 billion and grew 11% year over year.

Mr. Kartik: This revenue momentum drove reported full year net income of $8 4 billion and earnings per share of $11 21 for.

Mr. Kartik: For the quarter, we reported net income of $1 9 billion and earnings per share of $2 62.

Mr. Kartik: Let's now go through a more detailed look at the drivers of these results beginning with billed business on slide three.

Mr. Kartik: We reached record levels of spending for both the full year in the fourth quarter in 2023.

Mr. Kartik: Total Bill business grew 9% versus last year on an FX adjusted basis in the fourth quarter.

Mr. Kartik: <unk> business grew 6% as we continued to see more stable growth rates after lapping the prior year impact of Hong Kong back in the first quarter.

Stephen J. Squeri: However, we manage the company for the long term, and we anticipate there'll be a range of potential outcomes in any given year due to a variety of factors such as the external environment and actions we might take that we decide are best for the business. Looking ahead to this year, the continued momentum we've seen in the business as we've executed our strategy gives us confidence in our guidance for 2024, which is in line with our long-term aspiration. For the year, we expect to deliver annual revenue growth between 9% and 11% and full-year EPS between $1,265 and $1,350. In addition, we plan to increase our quarterly dividend on common shares outstanding to $0.70 a share, up from $0.60, beginning with the first quarter 2024 dividend declaration.

Mr. Kartik: The 6% growth rate does reflect a bit of softening versus last quarter, but I would point out that the number of transactions from our card members continues to grow double digits year over year.

A good indicator of the engagement of our customer base.

Mr. Kartik: Our growth was driven by 5% growth in goods and services spending and although slower than last quarter continued strong growth in travel and entertainment spending up 9% for the quarter.

Mr. Kartik: Restaurant spending remains our largest T&D category and reach 100 billion for the full year for the first time, while airline spending growth slowed in the quarter.

There were a few other key points to take away as we then breakdown I was spending trends across our businesses.

Mr. Kartik: Starting with our largest segment on slide four U S. Consumer grew billings at 7%. This quarter, we continue to see growth across all generations since each cohorts with millennials and Gen Z customers again, driving our highest build business group within this segment there spending was up 15% this quarter.

Stephen J. Squeri: This represents more than a 60% increase in the dividend from when we introduced our growth plan in January of 2022. As always, we will continue to run our business for the long term, and we'll do that by listening to our customers and meeting their needs through innovative, unique value propositions and exceptional service that reflects our brand built on trust and security, delivered and supported by a world-class workforce. In keeping our focus on supporting our customers and our colleagues, we are confident that we will continue to deliver strong growth on a sustainable basis over the long term. Thank you, and let me now turn it over to Christoph. Thank you, Steve, and good morning, everyone.

Mr. Kartik: Looking at commercial services on slide five.

Mr. Kartik: Overall growth came in at 1% this quarter consistent with last quarter's growth rate spending growth from our U S small and medium sized enterprise customers remained modest given the unique dynamics seen by small businesses over the past few years.

Specifically in 2022, we saw a large increase in organic spending as businesses restock their inventories following supply chain issues. During the pandemic. This causes significant grow over challenge with spending from this segment in the industry in 2023.

Mr. Kartik: Importantly, we continue to see strong levels of demand for new accounts high levels of retention and strong credit performance on our small business products.

Christoph: It's good to be here to talk about our 2023 results, which reflect another strong year of performance, and to lay out our expectations for 2024. I will discuss both our quarterly and full-year results this morning, since it's year-end, and since looking at our business on an annual basis is more in sync with how we run the company. I will start with our summary financials on slide two. Four-year revenues reached an all-time high of $16.5 billion, up 15% on an FX-adjusted basis.

Mr. Kartik: Looking ahead this positions us well for the future of spending growth rebounds.

Mr. Kartik: And lastly on slide six you'll see our highest growth again this quarter in international card services, we continued to see double digit growth across all regions and customer types spending from international consumers and from international SME and large corporate customers each grew 13% in the <unk>.

Mr. Kartik: Fourth quarter <unk>.

Mr. Kartik: Overall, while we are seeing a softer spend environment. We are pleased with the continued strong engagement and loyalty of our card members across the globe.

Mr. Kartik: As we think about 2024, we are assuming a spin environment similar to what we've seen in the past few quarters now.

Christoph: Our fourth-quarter revenues were $15.8 billion and grew 11% year-over-year. This revenue momentum drew reported full-year net income of $8.4 billion and earnings per share of $11.21. For the quarter, we reported net income of $1.9 billion and earnings per share of $2.62.

Mr. Kartik: Now moving on to loans and card member receivables on slide seven we saw year over year growth of 13%. We expect this growth, which has been elevated versus pre pandemic levels to continue to moderate as we progress through the 2024, but to steel grew modestly faster than billings.

Turning next to credit and provision on slide eight through 10.

Mr. Kartik: And most importantly, we continue to see strong and best in class credit metrics. We attribute this performance to the high credit quality of our customer base, our robust risk management practices and our disciplined growth strategy.

Christoph: Let's now go through a more detailed look at the drivers of these results, beginning with Bill Dismissed on slide three. We reached record levels of spending for both the full year and the fourth quarter in 2020. Total billable business grew 9% versus last year on an FX-adjusted basis. In the fourth quarter, Bell Business grew 6% as we continue to see more stable growth rates after lapping the prior year impact of Omicron back in the first quarter. This 6% growth rate does reflect a bit of softening versus last quarter, but I would point out that the number of transactions from our Cod members continues to grow double digits year over year, a good indicator of the engagement of our customer base. Our growth was driven by 5% growth in goods and services spending and, almost at the same rate as last quarter, continued strong growth in travel and entertainment spending, up 9% for the quarter. Restaurant spending remains our largest T&E category and reached $100 billion for the food year for the first time, while airline spending growth slowed in the quarter.

Mr. Kartik: As we had expected.

Mr. Kartik: Write off and delinquency rates did continue to tick up this quarter.

Mr. Kartik: You see on slide eight.

Mr. Kartik: Going forward, we expect to see these delinquency and write off rates remains strong with modest increases in 2024.

Turning now to the accounting of this critical performance on slide nine.

Mr. Kartik: The modest increase in our card member loans and receivables delinquency rates combined with a quarter over quarter growth in our loan balances resulted in a $400 million reserve build this reserve build combined with net write offs drove $1 $4 billion of provision expense in the fourth quarter.

Mr. Kartik: As you see on slide 10, we ended the fourth quarter with $5 4 billion of reserves, representing two 8% of our total loans and car member receivables and continuing to reflect the premium nature of our card member base.

Mr. Kartik: This reserve rate remains about 10 basis points below the level, we had pre pandemic or day one seasonal.

Mr. Kartik: We continue to expect the reserve rate to increase a bit as we move through 2024 similar to the modest increases we've seen over the past few quarters.

Mr. Kartik: Moving next to revenue on Slide 11, total revenues were up 11% year over year in the fourth quarter and up 15% for the full year on an FX adjusted basis.

Christoph: There are a few other key points to take away as we then break down our spending trends across our business. Starting with our largest segment, on slide 4, US consumer grew billings at 7% this quarter. We continue to see growth across all generations and age cohorts, with Millennials and Gen Z customers again driving our highest billed business growth within this segment. Their spending was up 15% this quarter. Looking at commercial services on slide five, overall growth came in at 1% this quarter, consistent with last quarter's growth rate. However, spending growth from our U.S. small and medium-sized enterprise customers remains modest, given the unique dynamics seen by small businesses over the past few years.

Mr. Kartik: Our largest revenue line discount revenue grew 5% year over year in Q4, and 9% for the full year as you can see on slide 12.

Mr. Kartik: This growth is mostly driven by the spending trends we discussed earlier.

Mr. Kartik: <unk> fee revenues were up 17% year over year in the fourth quarter and 2% for the full year as you can see on slide 13.

Mr. Kartik: As we expected growth continued to moderate a bit this quarter from the high levels. We saw earlier this year, reflecting our cycle of product refreshes.

Mr. Kartik: In 2024, we expect to exit the year with some further momentum compared to the current growth supported by continued product innovation and our focus on premium value propositions. We currently have plans to refresh around 40 products globally next year.

Mr. Kartik: In the quarter, we acquired $2 9 million, new cards, and the spend revenue and credit profile of our new card members continue to look strong.

Christoph: Specifically, in 2022, we saw a large increase in organic spending as businesses restocked their inventories following supply chain issues during the pandemic. This caused a significant growth-over challenge for spending from this segment in the industry in 2023. Importantly, we continue to see strong levels of demand for new accounts, high levels of retention, and strong credit performance on our small business products. Looking ahead, this positions us well for the future, when spending growth is expected to rebound. And lastly, on slide six, you see our highest growth again this quarter in the international card service. We continue to see double-digit growth across all regions and customers; spending from international consumers and from international SME and large corporate customers each grew 13% in the fourth quarter. Overall, while we're seeing the softest spend environment, we are pleased with the continued strong engagement and loyalty of our Cod members across the globe.

Mr. Kartik: Moving on to Slide 14, you can see that net interest income was up 30% year over year on an FX such as the basis in Q4 and 33% for the full year. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year.

Mr. Kartik: When you think about 2024, you should expect to see net interest income growth moderate as balanced growth moderates with some continued tailwind from our tenured customers continuing to rebuild balances.

And I would remind you that for our business model, we would not expect to see a meaningful impact from a lower interest rate environment next year.

To sum up revenues on slide 15, the power of our diversified model continues to drive strong revenue momentum.

Mr. Kartik: Looking forward into 2024th we expect to see revenue growth between 9% and 11%.

Mr. Kartik: Moving to expenses on slide 16.

Mr. Kartik: Overall total expenses were up 5% in the fourth quarter and 10% on the full year basis, both growing significantly lower than revenue.

Mr. Kartik: This expense growth reflects the strong growth we are seeing in our business. The investments we've made as well as our continued focus on expense discipline.

Christoph: As we think about 2024, we are assuming a spend environment similar to what we've seen in the past few quarters. Now, moving on to loans and card member receivables on slide 7. We saw a year-over-year growth of 13%. We expect this growth, which has been elevated versus pre-pandemic levels, to continue to moderate as we progress through 2024, but to still grow modestly faster than billing. Turning next to credit and provision on slides 8 through 10.

Mr. Kartik: Starting at the top of the page with variable customer engagement expenses.

Mr. Kartik: These cost came in at 40% of total revenues for the fourth quarter, a 41% for the full year.

I would note that these calls this cost came in a bit lower than our expectations, reflecting some of the natural hedges in our model.

Mr. Kartik: <unk> spend growth slowed a bit in the quarter, we saw lower rewards costs than we had expected for example, a lower mix of redemptions for airlines tickets and fewer points earned on airlines spend.

Mr. Kartik: In 2024, I would expect our variable customer engagement expenses to grow slightly higher than our revenue as we continue to focus on our premium products and drive engagement from our card members.

Christoph: First, and most importantly, we continue to see strong and best-in-class credit metrics. We attribute this performance to the high credit quality of our customer base, our robust risk management practices, and our disciplined growth strategy. As we had expected, our write-off and delinquency rates did continue to tick up this quarter, as you see on slide 8. Going forward, we expect to see these delinquency and write-off rates remain strong, with modest increases in 2024. Turning now to the accounting for this credit performance on slide nine, the modest increase in our card member loans and receivables delinquency rate, combined with a quarter-over-quarter growth in our loan balances, resulted in a $400 million reserve bill. This reserve bill, combined with net write-offs, drove $1.4 billion of provision expense in the fourth quarter.

Mr. Kartik: On the marketing line, we invested around $1 2 billion in the fourth quarter and $5 2 billion for the full year.

Mr. Kartik: On the marketing line, we invested around $1 2 billion in the fourth quarter and $5 2 billion for the full year.

Mr. Kartik: This is a bit below last year and our expectations to have marketing spent around $5 5 billion.

Marketing expense came in lower than we expected for the quarter, reflecting lower demand given the softer <unk> environment. However, we saw demand increase as we move through the quarter and we continue to plan for increased marketing spend in 2024, we are confident that with our sophisticated acquisition engine will do so and in <unk>.

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Moving to the bottom of slide 16 brings us to operating expenses, which were $4 2 billion in the fourth quarter and $14 9 billion for the full year 2023.

Mr. Kartik: This was above our original expectations driven by a few notable items in the quarter.

Mr. Kartik: First as part of the normal course of business, we set up a reserve to cover expenses as we continuously look at to enhance the organization's effectiveness. We also set up a reserve for exposure to a specific merchant and like many others. We were impacted by the devaluation of the Argentine peso, which increase our opex in Q.

Christoph: As you see on slide 10, we ended the fourth quarter with $5.4 billion of reserves, representing 2.8% of our total loans and card member receivables and continuing to reflect the premium nature of our card members. This reserve rate remains about 10 basis points below the level we had pre-pandemic or during day one season. We continue to expect the reserve rate to increase a bit as we move through 2024, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on slide 11, total revenues were up 11% year-over-year in the fourth quarter and up 15% for the full year on an FX-adjusted basis.

Mr. Kartik: <unk>.

Mr. Kartik: By one or $215 million.

Mr. Kartik: Looking forward, we continue to see Opex as a key source of leverage and our focus on delivering low levels of growth as we have historically done in 2024, we expect operating expenses to be fairly flat to this year's expense.

Mr. Kartik: We will of course continue to strip to assess opportunities as we move through the year and our flexible model will allow us to dial up or down investments as needed.

Mr. Kartik: <unk> everything into account in 2024, we expect total expense to grow mid to high level digits for the full year as we expect to drive continued leverage through our operating expenses.

Mr. Kartik: Turning next to capital on Slide 17, we have returned $5 3 billion of capital to our shareholders in 2023, including one 4 billion in the fourth quarter on the back of strong earnings generation. We ended the year with our CET one ratio of 10, 5% within our target range of 10%.

Christoph: Our largest revenue line, discount revenue, grew 5% year-over-year in Q4 and 9% for the full year, as you can see on slide 12. This growth is mostly driven by the spending trends we discussed earlier. Net car fee revenues were up 17% year over year in the fourth quarter and 20% for the full year, as you can see on slide 13.

7%.

Mr. Kartik: In Q1 2024, as Steve discussed, we expect to increase our dividend by over 15% to <unk> 70 per quarter consistent with our approach of growing our dividend in line with earnings and our 20% to 25 target payout ratio.

Christoph: As we expected, growth continued to moderate a bit this quarter from the high levels we saw earlier this year, reflecting our cycle of product refresh. In 2024, we expect to exit the year with some further momentum compared to the current growth, supported by continued product innovation and our focus on the premium value proposition. We currently have plans to refresh around 40 products globally next year.

Mr. Kartik: We plan to continue to return to shareholders the excess capital, we generate while supporting our balance sheet growth. We do not expect any material near term changes to our capital management approach.

Mr. Kartik: That brings me to our long term aspiration in 2024 guidance on slide 18.

Mr. Kartik: We continue to run our business with a focus on our aspiration of revenue growth in excess of 10% and mid teens EPS growth and we believe that is the right aspiration.

Christoph: In the quarter, we acquired 2.9 million new cards, and the spend revenue and credit profiles of our new card members continue to look strong. Moving on to slide 14, you can see that net interest income was up 30% year-over-year on an FX-adjusted basis in Q4 and 33% for the full year. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year. When you think about 2024, you should expect to see net interest income growth moderate as balance growth moderates, with some continued tailwind from our tenured customers continuing to rebuild their balances. And I would remind you that for our business model, we would not expect to see a meaningful impact from a lower interest rate environment next year.

Mr. Kartik: As Steve discussed for the full year 2024, specifically, we are reducing our guidance of having revenue growth of 9% to 11% and earnings per share between <unk> 65, and $13 15.

Mr. Kartik: This guidance remains in line with our aspiration and also factors in a range of scenarios based on what we're seeing in our business today.

Mr. Kartik: We also recently announced an agreement to sell our certified business.

Mr. Kartik: Our guidance and the items related to 2024th that I just walked through do not include the potential impact from this sale, we do expect to realize a sizeable gain on the sale and to reinvest a substantial portion of the gain back into our business as we've done with similar transactions in the past.

Mr. Kartik: We expected deal we expect the deal to close in the second quarter and plan to provide more detailed deck with that I'll turn the call back over to <unk> to open the call for your questions.

Christoph: To sum up revenues on slide 15, the power of our diversified model continues to drive strong revenue momentum. Looking forward into 2024, we expect to see revenue growth between 9% and 11%. Moving to expenses on slide 16, overall, total expenses were up 5% in the fourth quarter and 10% on a four-year basis, both growing significantly lower than revenue.

Christopher Brendler: Thank you Christophe before we open up the lines for Q&A I'll ask those in the queue to please limit yourself to just one question.

Christophe: Thank you for your cooperation and with that the operator will now open up the line for questions operator.

Christophe: Ladies and gentlemen, if you wish to ask a question. Please press Star then one on your Touchtone phone.

Christoph: This expense growth reflects the strong growth we are seeing in our business, the investments we've made, as well as our continued focus on expense discipline. Starting at the top of the page with variable customer engagement expenses, these costs came in at 40% of total revenues for the fourth quarter and 41% for the full year.

Mr. Kartik: You'll hear a tone, indicating that you've been placed in Q you may remove yourself from the queue at any time by pressing Star then Q.

Mr. Kartik: If you are using a speakerphone, please pick up the handset before pressing the numbers.

Mr. Kartik: One moment please for the first question.

Donald Fandetti: Our first question comes from Don <unk> of Wells Fargo. Please go ahead.

Donald Fandetti: Good morning.

Christoph: I would note that these costs came in a bit lower than our expectations, reflecting some of the natural hedges in our model. As T&E spend growth slowed a bit in the quarter, we saw lower remorse costs than we had expected, for example, a lower mix of redemptions for airline tickets and fewer points earned on airline spend.

Donald Fandetti: The <unk> 24, EPS guidance and broad guidance I guess January spend.

Donald Fandetti: Some of your peers have noted a slowdown.

Donald Fandetti: On whether can you comment on that and then just maybe talk a little bit about built.

Mr. Kartik: Billed business in 'twenty four in terms of SME.

Mr. Kartik: Yes.

So we don't talk about Mt.

Christoph: In 2024, I would expect our variable customer engagement expenses to grow slightly higher than our revenue as we continue to focus on our premium products and drive engagement from our customers. On the marketing line, we invested around $1.2 billion in the fourth quarter and $5.2 billion for the full year. This is a bit below last year and our expectations to have marketing expenditure at around $5.5 billion. However, marketing expense came in lower than we expected for the quarter, reflecting lower demand given the softer T&E environment.

Speaker Change: Monthly numbers, so let alone about.

Speaker Change: A few weeks into the month of January so are seeing fastest to wait until the end of the quarter and will provide a lot more color and detail on the billing in January so far.

Speaker Change: As far as how we think about build business in 2024.

Speaker Change: Our planning assumption is that we should expect.

Are we expecting billings to be consistent with what we've seen in the prior few quarters.

Christoph: However, we saw demand increase as we moved through the quarter, and we continue to plan for increased marketing spend in 2024. We're confident that with our sophisticated acquisition engine, we'll do so in an efficient way. Moving to the bottom of slide 16 brings us to operating expenses, which were $4.2 billion in the fourth quarter and $14.9 billion for the food year 2020. This was above our original expectations, driven by a few notable items in the quarter. First, as part of the normal course of business, we set up a reserve to cover expenses as we continuously look for ways to enhance the organization's effectiveness. We also set up a reserve for exposure to a specific merchant. And like many others, we were impacted by the devaluation of the Argentine peso, which increased our OPEX in Q4 by $115 million.

Speaker Change: And we are ready to see an upside if there is some but for now that's the assumption we baked in our plans and how we constructed this guidance.

On the SME side.

Speaker Change: It's the same it's the same assumption in Q1, we are assuming.

Speaker Change: Something similar to what we're seeing in Q3 Q4.

Speaker Change: And.

Speaker Change: We are very focused on winning the recoveries with Smes.

Speaker Change: As I said in my remarks. These card members have been through a lot over the last two or three years.

Speaker Change: And we are focusing on providing the best experience. The best products, we are focusing on acquiring as many customers as we can and helping them grow their business and we'll be ready when when theyre ready historically this has been.

Speaker Change: A volatile segment for us how dynamic this customer segments are and we play a critical role in that industry and will be we will be ready when they are ready.

Thank you. The next question is coming from Ryan Nash of Goldman Sachs. Please go ahead.

Christoph: Looking forward, we continue to see OPEX as a key source of leverage and are focused on delivering low levels of growth as we have historically done. In 2024, we expect operating expenses to be fairly flat to this year's expectations. We will, of course, continue to assess opportunities as we move through the year, and our flexible model will allow us to dial up or down investments as needed. Taking everything into account, in 2024, we expect total expenses to grow mid to high single digits for the full year as we expect to drive continued leverage through our operating expenses. Turning next to the Capitol on slide 17.

Speaker Change: Hey, good morning, guys.

Speaker Change: Good morning.

Christopher Brendler: Maybe the maybe to build on Don's question can you, maybe just dig a little bit deeper on some of the drivers of revenue growth at discount revenues card fees and Christopher I know you said that NII should.

Christopher Brendler: Decelerate then.

Christopher Brendler: Are we assuming any sort of reacceleration as we move through the year, particularly in areas like U S. Consumer SME. Thank you yes.

Hey, good morning, Ryan. Thank you for your question so.

Christopher Brendler: The building blocks of the revenue growth remained the same at or very high level, we expect billing and therefore discount revenue to grow at a pace similar to what we've seen in there in the recent quarters.

Christoph: We returned $5.3 billion of capital to our shareholders in 2023, including $1.4 billion in the fourth quarter on the back of strong earnings generation. We ended the year with our CET1 ratio at 10.5%, within our target range of 10 to 11%. In Q1 2024, as Steve discussed, we expect to increase our dividend by over 15% to $0.70 per quarter, consistent with our approach of growing our dividend in line with earnings and our 20 to 25 target payout ratio. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. We do not expect any material near-term changes to our capital management approach.

Christopher Brendler: We expect card fees. So Q4 is at 17% full year of 20%.

Christopher Brendler: We expect.

Christopher Brendler: Card fees to be a key contributor to growth going forward to remain a key contributor to growth going forward and actually to exit Q4 at a higher level than where we are right now.

Christopher Brendler: Ill give you the context in my remarks.

Christopher Brendler: Very much supported by the constant strength in premium acquisition there.

Christopher Brendler: <unk> refresh and renewals stat.

Christopher Brendler: We are committed to execute on and very strong retention rates, which we have experience for many years now.

Christopher Brendler: And when it comes to the last.

Christopher Brendler: Either a component of our revenue pool net interest income you should expect that growth rate to moderate very much driven by the fact that you have seen the trend I'm sure Ryan.

Christoph: That brings me to our long-term aspiration and 2024 guidance on slide 18. We continue to run our business with a focus on our aspiration of revenue growth in excess of 10% and meeting EPS growth, and we believe that is the right target. As Steve discussed, for the Food Year 2024 specifically, we are introducing our guidance of revenue growth of 9 to 11% and earnings per share between 12.65 and 13.15. This guidance remains in line with our aspiration and also factors in a range of scenarios based on what we're seeing in our business today. We also recently announced an agreement to sell our certified business. Our guidance and the items related to 2024 that I just walked through do not include the potential impact of this sale.

Christopher Brendler: Sure.

Christopher Brendler: Asset growth and their lending growth rate have been moderating over the past quarters, and we expect that moderation to continue.

Christopher Brendler: The very strong growth was.

Christopher Brendler: A function of.

Christopher Brendler: Tenured card members.

Mr. Kartik: <unk> building balances post Covid and.

Speaker Change: Some states, we get are we going to reach their either their.

Mr. Kartik: A more normal rate, there and that will naturally drive NII due to a more moderate level of growth.

Mr. Kartik: <unk> also mentioned that we.

Mr. Kartik: <unk> believes that the interest rate dynamic and what the fed will design doesn't play a big role here in terms of what's going to happen to NII and when you put all of this together and you can we run multiple scenarios, what if billing is a bit stronger.

Mr. Kartik: NII is a bit weaker and we land in the same range of 9% to 11%. So that's very much how we think about about the revenue guidance.

Christoph: We do expect to realize a sizable gain on the sale and to reinvest a substantial portion of the gain back into our business, as we've done with similar transactions in the past. We expect the deal to close in the second quarter and plan to provide more detail then. With that, I'll turn the call back over to Cardi to open the call to your questions. Thank you, Christophe.

Thank you. The next question is coming from Mark to freeze of Deutsche Bank. Please go ahead.

Mr. Kartik: Yes. Thanks.

Mr. Kartik: I was hoping you could dig a little further into kind of where the loan growth is coming from how much of it is from new customers are relatively recent we added customers versus older and gaining share there and also whether youre seeing any kind of difference in credit performance.

Cardi: Before we open up the lines for Q&A, I will ask those in the queue to please limit themselves to just one question. Thank you for your cooperation, and with that, the operator will now open up the line for questions. Operator?

Mr. Kartik: And kind of balances from from newer customers versus older.

Mr. Kartik: Okay.

Mr. Kartik: So let me take loan growth first.

Mr. Kartik: They're the dynamic on loan growth has not changed and for several quarters now. It's also our philosophy and how we run the company.

Cardi: Ladies and gentlemen, if you wish to ask a question, please press star, then one on your touchtone phone. You'll hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing star, then two.

Mr. Kartik: 70% of their.

Mr. Kartik: Loan growth comps from tenured card members and what we call tenured card members as card members, who have been with us more than 12 months.

That's very much how we think about acquisition.

Cardi: If you're using a speakerphone, please pick up the handset before pressing the numbers. One moment, please, for the first question. Our first question comes from Don Fandetti of Los Fargo. Please go ahead. Good morning.

Mr. Kartik: We acquire card members with developed relationships with them then we offer them either we cross sell products, we increased the lines, we nurture those relationships.

Mr. Kartik: We do that because we understand them better we understand their spend patterns.

Donald Fandetti: Good to see the 24 EPS guidance and rev guidance. I guess on January spend, some of your peers have noted a slowdown on weather. Can you comment on that?

And they understand our products better as well and Thats the driver.

Mr. Kartik: They're either we don't do much balance transfers.

Mr. Kartik: Any at all.

And we don't have promotional offers much promotional offers also so it's very much growing with our tenured card members and as part of our strategy too.

Donald Fandetti: And then maybe talk a little bit about building a business in 24 in terms of SMBs? So we don't talk about monthly numbers, so let alone about you know a few weeks into the month of January, so I think it's best to wait until the end of the quarter, and we'll provide a lot more color and detail on the billing in January. As far as how we think about building business in 2024, our planning assumption is that we should expect, or we're expecting, buildings to be consistent with what we've seen in the You know, and we're ready to see an upside if there is some, but for now, that's the assumption we baked into our plans and how we constructed this guidance. On the SME side, it's the same assumption, if you want.

Mr. Kartik: Contain a few on the credit risk and to control it.

And when it comes to the credit profile of the new card members, we haven't changed our credit underwriting models right we still.

Mr. Kartik: And we haven't changed as well.

Mr. Kartik: Our marketing channels and products, one we still skew towards positive selection in terms of credit profile that has not changed and.

Mr. Kartik: I need to say that they are.

Mr. Kartik: <unk> that we bring in and become recent card members are very good credit profile.

Mr. Kartik: Thank you. The next question is coming from Bill Kirk Hot CFO Research. Please go ahead.

Bill Carcache: Thank you for taking my question. Good morning, I wanted to follow up on your comments about customer engagement spending outpacing revenue growth.

Bill Carcache: Can you speak broadly to your ability to continue to drive customer engagement with elevated investment spending while at the same time offsetting that margin pressure with operating expense leverage in other parts of the business.

Donald Fandetti: We are assuming something similar to what we're seeing in Q3, Q4. And we are very focused on winning the recoveries with SMEs. As I said in my remarks, these current members have been through a lot over the last two, three years.

Bill Carcache: And I guess.

Donald Fandetti: And we are focusing on providing the best experience, the best products. We're focusing on acquiring as many customers as we can and helping them grow their business. And we'll be ready when they're ready.

Bill Carcache: Do you anticipate positive operating leverage on an aggregate basis with revenue growth outpacing the sum of that customer engagement and operating expense combined.

Okay.

Bill Carcache: A lot here.

So let me first take you through.

Donald Fandetti: Historically, this has been a volatile segment for us. You know how dynamic these customer segments are, and we play a critical role in that industry. And we'll be ready when they're ready.

Customer engagement there.

Bill Carcache: Sure.

The key thing for us and you've heard us say this for years right.

Bill Carcache: We build premium products and we price for that value.

Donald Fandetti: Thank you. The next question is coming from Ryan Nash of Goldman Sachs. Please go ahead. Hey, good morning, guys. Good morning.

You've heard us say as well that over the last years.

Bill Carcache: We did.

Ryan M. Nash: Maybe to build on Don's question, can you maybe just dig a little bit deeper on some of the drivers of revenue growth, so discount revenues, card fees, NII, Christophe. I know you said that NII should decelerate. Are we assuming any sort of re-acceleration as we move through the year, particularly in areas like U.S. consumer or SME? Yeah. Hey, good morning, Ryan.

Bill Carcache: The mix of the portfolio shifted more towards premium products.

Bill Carcache: That premium Ization of the portfolio is the key driver behind that ratio.

Bill Carcache: <unk>.

Bill Carcache: Variable customer engagement expenses to revenue the more platinum card members, we bring them more variable customer engagement expenses, you should expect to see.

Bill Carcache: But at the same time, we have a lot of initiatives to actually.

Christophe Lacayac: Thank you for your question. So, the building blocks of revenue growth remain the same. At a very high level, we expect billing and, therefore, discount revenue to grow at a pace similar to what we've seen in the recent quarters. We expect card fees, so Q4 is at 17%, and footer at 20%. We expect card fees to be a key contributor to growth going forward, to remain a key contributor to growth going forward, and actually to exit Q4 at a higher level than where we are right now. And I gave you the context in my remarks, very much supported by the constant strength in premium acquisition. Product refreshes and renewals that we are committed to executing on, and very strong retention rates, which we have experienced for many years now.

Mr. Kartik: Optimize this.

Speaker Change: We have a lot of innovation in that space secondary share with you want that is draw.

Driving a lot of efficiencies for us we recently introduced their pay with points option, where you can actually go in the app or the website select one specific transaction and pay with points. So we have that either constant innovation to try to delight the customer.

Speaker Change: <unk> make their life easier and at the same time.

Speaker Change: Create efficiencies in terms of the weighted average cost per point.

Speaker Change: Specifically in Q4, one of the driver of that efficiency or that variable card member engagement expense was the fact that we sold less point redemption with airline tickets, which is one of the most expensive cost per point that we have.

Christophe Lacayac: And when it comes to the last... You know, component of our revenue pool, net interest income, you should expect that growth rate to moderate, very much driven by the fact that, and you've seen the trend, I'm sure, Ryan, their asset growth and their lending growth rate have been moderating over the past quarters, and we expect that moderation to continue. The very strong growth was a function of tenured con members rebuilding balances post-COVID, and, you know, at some stage, we're going to reach their, you know, their more normal rate there, and that will naturally drive NII, you know, to a more moderate level of growth.

That drove some efficiencies in that metric we also saw.

Speaker Change: There was some softness.

Speaker Change: In some <unk> categories.

Speaker Change: Yes.

Speaker Change: Point accelerators, firmed and that created as well some some efficiencies there. The reason why im pointing that out is just to give you. Some example of some of the natural hedges that exists in our business model, where when you see a little bit of softness in the top line that creates some some savings as well.

Speaker Change: <unk> in some expense lines.

Christophe Lacayac: You know, I'm also going to mention that we believe that the interest rate dynamic and what the Fed will decide doesn't play a big role here in terms of what's going to happen to NII, and when you put all of this together, and you can, you know, we run multiple scenarios, what if billing is a bit stronger, what if, you know, NII is a bit weaker, and we land in the So that's very much how we think about the revenue dynamic. Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.

Speaker Change: So we guided.

Speaker Change: They're towards a little bit of an increase in terms of the variable card member engagement expenses, and we're going to keep monitoring that but but I feel good about that trend and I think that that margin is still.

Mr. Kartik: There is strong and able to generate very strong earnings.

Mr. Kartik: We've committed to containing opex and as I said, we expect 2024 offerings.

Mr. Kartik: Expenses to be.

Mr. Kartik: About flat to where we are ending 2023, and marketing expenses will dial up or down based on opportunities that we see space on the efficiencies that we create as well the model works really well as you can see.

Mark C. DeVries: Yeah, thanks. I was hoping you could dig a little further into kind of where the loan growth is coming from, how much of it is from new customers or relatively recently added customers versus older and gaining share there, and also whether you're seeing any kind of difference in credit performance on kind of balances from newer customers versus older. Okay.

Mr. Kartik: And I'm comfortable that the model is strong and we are stress testing that model, we're running multiple scenarios and.

Mr. Kartik: And it works well in terms of its ability to generate earnings over time, and I would see risk adjusted earnings because that powerful modeled what we pay on variable card member engagement expenses.

Mr. Kartik: <unk> stock with a multiple on the credit line. We are track positive select we generate positive select we attract premium card members, who have a very strong credit profile and are like paying for that as opposed to trying to control the credit risk down the road.

Speaker Change: So let me take loan growth first. The dynamic on loan growth has now changed, and for several quarters now, it's also our philosophy and how we run the company. About 70% of their, the commercial economy grows, and our long growth comes from tenured Con members who have been with us more than twelve months. I think of acquisition as a lot more important than the acquisition of our products.

Mr. Kartik: Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.

Speaker Change: We have a lot of people who have been with us for a long time, and they understand our products better as well, and that's the driver. We don't do many balance transfers, if any at all, and we don't have many promotional offers. So it's very much growing with our tenured Con members, and it's part of our strategy to contain the credit risk and control it. And when it comes to the credit profile of the new Con members, we haven't changed our credit and deriving models, right? We still do, and we haven't changed as well our marketing channels and products.

Mr. Kartik: Hi, Good morning, Thank you for taking my questions.

Jeffrey C. Campbell: Chris and Steve just wanted to dig into the softer G&A trends a little bit.

Jeffrey C. Campbell: It looks like you are seeing some softness, particularly in the airline span youre seeing some slower point redemptions for tickets there.

Jeffrey C. Campbell: Just maybe give us some insight into what you are hearing and seeing from your card members on that front and then just maybe in the order book can you.

Jeffrey C. Campbell: Help us understand what you're kind of embedding in your expectations for <unk> from here on I think in the past you talked about how.

Booking trends had been a pretty good indicator of what's to come maybe any comment on what youre seeing there.

Speaker Change: While we still skew towards positive selection in terms of credit profile, that has not changed. I need to say that the prospects that we bring in and who have become recent cohort members have very good credit profiles. Thank you. The next question is coming from Bill Carcache of Wolf Research. Please go ahead. Thank you for taking my question. Good morning.

Jeffrey C. Campbell: Yes.

Jeffrey C. Campbell: Danny.

Danny: Sequentially the growth rate came down I need to point out, though that is still up 9%.

Danny: Year over year.

So it's a pretty strong growth rate.

Bill Carcache: I wanted to follow up on your comments about customer engagement and spending outpacing revenue growth. Can you speak broadly to your ability to continue to drive customer engagement with elevated investment spending while at the same time offsetting that margin pressure with operating expense leverage and other parts of the business? And I guess, you know, do you anticipate positive operating leverage on an aggregate basis, with revenue growth outpacing the sum of that customer engagement and operating expense combined? There's a lot here.

Danny: In terms of airline spending have you heard I am sure. The various airlines. They all have made comments about the bit other softer demand and since many of those customers are using an American express card.

Danny: For the airline ticket we saw.

Danny: A similar trend these being said booking remains very strong on our.

Danny: Tls segment I don't have the numbers in front of me, but but I know there were strong. So so we'll see whether it's the beginning of a trend or whether it's a data point.

Danny: Yes.

Danny: We keep seeing a lot of strength in the partnership we have with Delta is working very very well originations.

Speaker Change: So let me first take you through customer engagement. The key thing for us, and you've heard us say this for years, right? We build premium products, and we prize that value. You've heard us say as well that over the last year, the mix of the portfolio shifted more towards framing your product. That premiumization of the portfolio is the key driver behind that ratio of variable customer engagement expenses to revenue.

Danny: New cars are very strong and card members decided to redeem a bit less in Q4 with airline tickets than it did in the past and we've seen that choppiness as well in the past I don't worry it's one data point.

Danny: And for 2024, we haven't communicated exactly what assumptions, we're making by by category.

Danny: But I'm.

Danny: Im not too worried we have a card member base that loves traveling and im.

Speaker Change: The more platinum card members we bring onboard, the more variable customer engagement expenses you should expect to see. But at the same time, we have a lot of initiatives to actually optimize this. We have a lot of innovation in that space, and I'm going to share with you one that is driving a lot of efficiencies for us. We recently introduced their pay with points option, where you can actually go into the app or the website, select one specific transaction, and pay with points.

Danny: And I'm sure they're going to keep traveling.

Danny: Thank you. The next question is coming from Rick Shane of Jpmorgan. Please go ahead.

Danny: Thanks for taking my questions. This morning.

Danny: You guys had alluded to the fact that the reserve rate is going to go up or drift up in 2024.

Richard B. Shane: I'm curious, if what's driving that presumably its a mix shift between loans and.

Speaker Change: So we have that constant innovation to try to delight customers, make their life easier, and at the same time, create efficiencies in terms of the weighted average cost per point. Specifically, in Q4, one of the drivers of that efficiency or that variable card member engagement expense was the fact that we saw less point redemption with airline tickets, which is one of the most expensive costs per point that we have. That drove some efficiencies in that metric.

Richard B. Shane: Card member receivables, but im.

Richard B. Shane: Wondering if at any level, you're also suggesting that the reserve rate on the loan portfolio is going to go up.

Richard B. Shane: As a reflection of either some sort of shift there or is it just pure mix shift as the loan portfolio grows faster than the Carmike singles.

So thank you Rick for your question.

Richard B. Shane: Sure.

Richard B. Shane: This is this is very this is an important point so I'm glad you're asking the question. The first thing I want to say is that the.

Speaker Change: We also saw, as there was some softness in some T&E categories, less point accelerators earned, and that created some efficiencies there. The reason why I'm pointing that out is just to give you some example of some of the natural hedges that exist in our business model, where when you see a little bit of softness in the top line, that creates some savings as well in some expense lines. So, you know, we guided them towards a little bit of an increase in terms of the variable car member engagement expenses. And we're going to keep monitoring that, but I feel good about that trend. And I think that that margin is still very strong and able to generate very strong earnings. We've committed to containing OpEx, and as I said, we expect 2024's offering of expenses to be, you know, So that's flat to where we are ending 2023. And marketing expenses will go up or down based on opportunities that we see, based on the efficiencies that we create as well. The model works really well, as you can see.

Richard B. Shane: Absolute level when you look at the delinquency rates or the write off rates are very low.

Richard B. Shane: In terms of.

Richard B. Shane: Our historical performance and on the slide.

Twitter as well as their pre pandemic levels. The write off rate is 2% in Q4. It was two 2% pre pandemic right. So we're still below where we were pre pandemic.

Richard B. Shane: In absolute they are very low relative to our peers, which I know you know well there also.

Richard B. Shane: Very good and I'm sure you noted that every.

Richard B. Shane: Competitor or peer reported their numbers and experienced the same tick.

Mr. Kartik: A higher magnitude our tick up of 'twenty.

Mr. Kartik: <unk>.

Mr. Kartik: 0.2.

Mr. Kartik: Oh 20 basis point is one of the lowest in the industry. So I feel good about where we are and I feel good about the trend.

Mr. Kartik: When it comes to the dynamic in the portfolio. The key driver behind this is that there are still some normalization going on here, we are moving from sub 1% write off rate during the.

Speaker Change: And I'm comfortable that the model is strong. And we are stress-testing that model, running multiple scenarios. And it works well in terms of its ability to generate earnings over time. And I would say risk-adjusted earnings, because that powerful model, what do we pay on variable car member engagement expenses? comes back with a multiple on the credit line. We attract positive select. We generate positive select.

Mr. Kartik: The pandemic as you all know on this call this was not a sustainable level.

Mr. Kartik: And these rates are normalizing and there are normalizing either slow pace.

Mr. Kartik: And and I like that and the 2% is again, a place where I feel comfortable from a credit standpoint.

Mr. Kartik: The other thing to expand a little bit and take a step back in terms of what kind of loan growth we are seeing.

Speaker Change: We attract premium card members who have a very strong credit profile, and I like paying for that as opposed to trying to control the credit risk down the road. Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead. Hi, good morning.

The biggest contributors in terms of loan balances are their pay overtime facility that we offer with our charge products.

Mr. Kartik: And their <unk>.

Mr. Kartik: Co brands.

Mr. Kartik: Cards, and so both those portfolio as very strong credit profile and better credit profile than what we called internally proprietary.

Jeffrey C. Campbell: Thank you for taking my question, Chris and Steve. I just wanted to dig into the softer T&E trends a little bit. You know, it looks like you're seeing some softness, particularly in airline spend. You're seeing some slower point redemptions for tickets there.

Mr. Kartik: Lending, which includes blue cash every days for instance, so if anything the profile of the portfolio and the mix of the portfolio is shifting and evolving more towards products that have a strong credit profile and high velocity. This being said that normalization is happening and.

Jeffrey C. Campbell: Just maybe give us some insight into what you're hearing and seeing from your card members on that front, and then, just maybe, in the forward look, can you help us understand what you're kind of embedding in your expectations for T&E from here? I think in the past, you've talked about how the booking trends have been a pretty good indicator of what's to come. Maybe any comment on what you're seeing there?

Speaker Change: That's what's creating that little tick up and as I said in my comments, we're not quite done with that normalization there are still a bit more to come in our mind.

Speaker Change: But not a lot.

Yes.

Speaker Change: Thank you. The next question is coming from Sal Martinez of HSBC. Please go ahead.

Jeffrey C. Campbell: Yeah, so T and E, sequentially, the growth rate came down. I need to point out, though, that it's still up 9%. So it's a pretty strong growth rate. In terms of airline spending, if you heard, I'm sure the various airlines all made comments about a bit of a softer demand. And since many of those customers are using an American Express card to pay for the airline ticket, we saw a similar trend. However, this being said, booking remains very strong in our TLS segment. I don't have the numbers in front of me, but I know they were strong.

Speaker Change: Hey, good morning, Thanks for taking my question just to ask one on capital.

Speaker Change: Any updated thoughts on how youre thinking about.

Speaker Change: While the land game obviously.

Sal Martinez: Preliminary expectations for the proposal at least are that it would take you down to closer to 7%, but there is a lot of talk about that.

Sal Martinez: Soft and just how are you thinking about.

Sal Martinez: <unk>.

Sal Martinez: Capital Management, you, obviously increase your dividend, but how.

Sal Martinez: How are you thinking about buybacks going forward in light of the uncertainty.

Jeffrey C. Campbell: So we'll see whether it's the beginning of a trend or whether it's just a data point. But we keep seeing a lot of strength. And the partnership we have with Delta is working very, very well. Originations of new cars are very strong. And car members decided to redeem a bit less in Q4 with airline tickets than they did in the past. And we've seen that choppiness as well in the past.

Sal Martinez: Yes.

Sal Martinez: So thank you for your question.

Sal Martinez: Not a lot has changed on that front.

Speaker Change: Outside of the fact that we've been meeting with regulators, Steve met with regulators I met with regulators as well and what I can tell you is that they are listening.

Jeffrey C. Campbell: I don't worry. It's one data point. And for 2024, we haven't communicated exactly what assumptions we're making by category. But I'm not too worried. We have a car membership base that loves traveling, and I'm sure they're going to keep traveling. Thank you. The next question is coming from Rick Shane of J.P. Morgan. Please go ahead.

Speaker Change: They are engaged.

Speaker Change: And I think they understand our comments.

Speaker Change: The ball is back in their camp now and they are incorporating all the comments. They are received from the industry and I'm sure you've seen a lot of those comments as well. So there are a lot of work to do right now we're in waiting mode.

Speaker Change: And I think we're expecting the current estimate is we are expecting there.

Richard B. Shane: Thanks for taking my questions this morning. Look, you guys alluded to the fact that the reserve rate is going to go up or drift up in 2024. I'm curious about what's driving that, presumably it's a mixed shift between loans and card member receivables, but I'm wondering if, at any level, you're also suggesting that the reserve rate on the loan portfolio is going to go up as a reflection of either some sort of shift there, or is it just pure mixed shift as the loan portfolio grows faster than the card member receivables? So thank you, This is a very important point, so I'm glad you're asking the question. The first thing I want to say is that the absolute levels, when you look at the delinquency rates or the write-off rates, are very low in terms of our historical performance. And on the slide, I put as well their pre-pandemic levels. The write-off rate is 2% in Q4. It was 2.2% pre-pandemic, right?

Speaker Change: Or at least their next version.

Speaker Change: The rules by the end of 2024, we'll see.

Speaker Change: It took 10 years to get to their first drops so.

Speaker Change: We will see when we get to the next version.

Speaker Change:

Speaker Change: I'm not too concerned.

Speaker Change: I feel good about our starting point and our capital position as you know we generate about 30% return on equity, which means that we generate a ton of capital.

Speaker Change: And.

Speaker Change: For now we're not going to change our capital policy. The first thing. We do is of course fund the balance sheet. Then we distribute dividends we feel very confident about the increase that we are planning to do this year and the rest is going to go into share buybacks. So that we keep.

Speaker Change: Capital between 10, and 11% of our risk weighted asset and that's what we've done for years, that's what we're going to keep doing.

Speaker Change: We're going to adapt to the Basel rule, we're running the company conservatively as well with a big buffer over the 7%.

Speaker Change: <unk>.

Speaker Change: So we're still below where we were pre-pandemic. So in absolute terms, they're very low, relative to our peers, which I know you know well, they're also very good, and I'm sure you noted that every competitor or peer reported their numbers and experienced the same tick, but at a higher magnitude, our tick up of 20 or, you know, point two, 20 basis points is one of the lowest in the industry. So I feel good about where we are and I feel good about the trend. When it comes to the dynamic in the portfolio, the key driver behind this is that there's still some normalization going on here.

Speaker Change: Right that we have and so.

Speaker Change: So nothing has changed much on that front, so more to come when we get the final rules.

Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.

Speaker Change: Great. Thanks, and many of my questions have been asked and answered.

Hoping to.

Speaker Change: Follow up on a comment that you had just made about.

Speaker Change: Apple pay overtime business could you talk a little bit more about the characteristics of that you mentioned that obviously thats going to.

Speaker Change: Tenured charge card customers. So the quality is very strong can you talk a little bit about the yields and how much.

Speaker Change: You've seen in kind of growth from that product.

Speaker Change: Yes.

Speaker Change: We are moving from a sub-1% write-off rate during the pandemic. As you all know on this call, this was not a sustainable level, and these rates are normalizing, and they are normalizing at a slow pace, and I like that. And the 2% is, again, the place where I feel comfortable from a credit standpoint. They're there.

Speaker Change: Sure.

Speaker Change: So your description is correct there.

Speaker Change: <unk> is a facility that we attached to our charge card products.

Speaker Change: Are they can decide if they want to revolve proportion of there.

Speaker Change: Or their payout.

Mr. Kartik: The this is the fastest growing category for us in terms of loan growth.

Mr. Kartik: It was very well received.

Speaker Change: The other thing to expand a little bit and take a step back in terms of, you know, what kind of loan growth we are seeing. The biggest contributors in terms of loan balances are their pay over time facility that we offered with our charge product and their co-branded cars. And so both those portfolios have very strong credit profiles and better credit profiles than what we call internally proprietary lending, which includes blue cash every day, for instance. So if anything, the profile of the portfolio and the mix of the portfolio is shifting and evolving more towards products that have a strong credit profile and high velocity. This being said, normalization is happening, and that's what's creating that little kickup.

Mr. Kartik: It was very well received.

Mr. Kartik: By either by the card members.

And I don't know what else I can I can tell you rich.

Mr. Kartik: Remember that.

The charge card as a no preset limits.

Mr. Kartik: Which is an important feature here so it's a way for us to.

Mr. Kartik: Give them as well and it's a painful products. So it's a way for us to give them a facility where they can resolve over a period of time and as I've said previously their credit profile is very strong on this product.

Mr. Kartik: Very much because it is attached to a very premium base right.

Mr. Kartik: Either premium gold card members are using this facility and revolving from time to time.

Speaker Change: And as I said in my comments, we're not quite done with that normalization. There's still a bit more to come in our minds, but not a lot. Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead. Hey, good morning.

Mr. Kartik: Thank you. The next question is coming from Sanjay <unk> of J P. W. Please go ahead.

Mr. Kartik: Thank you.

Mr. Kartik: Maybe I could ask the questions regarding whats embedded in the revenue growth expectations for 2024 differently.

Saul Martinez: Thanks for taking my question. Um, let's just ask on on capital. Um, any updated thoughts on how you're thinking about, , Dr. C. S. Dr. C. C. C. C. C. C. C. C. C, uh you know capital management you obviously increase your dividend but um how are you thinking about buybacks going forward in light of the uncertainty? Yeah.

Mr. Kartik: If we look at the fourth quarter exit run rate.

Speaker Change: That sort of target as to the low end of the guidance range and then Christophe you mentioned lower rates shouldn't helped aren't you guys liability sensitive on the charge card portfolio. Thanks.

Speaker Change: So thank you for your question. So not a lot has changed on that front outside of the fact that we've been meeting with regulators. Steve met with regulators.

Speaker Change: So let me take the second question first we are slightly liability sensitive.

Speaker Change: And the key assumption for us.

Speaker Change: I met with regulators as well, and what I can tell you is that they are listening. They are engaged, and I think they understand our comments. The ball is back in their camp now, and they're incorporating all the comments they received from the industry. And I'm sure you've seen a lot of those comments as well, so they have a lot of work to do.

I think the comment remains that in its totality, our total balance sheet of total <unk>.

Funding stack level theme.

Speaker Change: The impact of rate cuts is going to be very small to our NII.

Speaker Change: Right now, we're in waiting mode, and I think we're expecting, the current estimate is we're expecting their, or at least their next version of the rules by the end of 2024. We'll see. It took 10 years to get to their first draft, so we'll see when we get the next version.

They're the big unknown here is what's going to happen to the beta.

Speaker Change: We have been.

Speaker Change: As an industry training around seven on there we up.

Speaker Change: We are probably going to trend to seven on the way down, but not immediately and it's hard to say exactly at this point in time, where we're going to be.

Speaker Change: I'm not too concerned. I feel good about our starting point and our capital position. As you know, we generate about 30% return on equity, which means that we generate a ton of capital. And, you know, for now, we're not going to change our capital policy.

Speaker Change: When the fed starts cutting rates.

Speaker Change: We are making assumptions with that we think are conservative.

But we don't know for sure and we'll see where we are so there is a bit of uncertainty here, but what is what you knew for sure is that you should not expect.

Speaker Change: The first thing we do is, of course, fund the balance sheet, then we distribute dividends. We feel very confident about the increase that we are planning to do this year. And the rest is going to go into a share buyback so that we keep capital between 10 and 11% of our risk-weighted assets. And that's what we've done for years.

Speaker Change: Big impact or NII, depending on on the rate on the rate curve.

Speaker Change: Going back to their to your first question around revenue.

Speaker Change: I, just I don't have a lot to see.

Speaker Change: On top of what I said earlier.

And what I said in my prepared remarks, I'm happy to be surprised on the upside.

Speaker Change: That's what we're going to keep doing, and we're going to adapt to the Basel rule. You know, we're running the company conservatively as well with a big buffer over the 7% rate that we have. And so, nothing has changed much on that front. So more to come when we get the final Basel rules.

Speaker Change: <unk> business is stronger.

Speaker Change: Card fees, we have good visibility.

Mr. Kartik: NII of <unk> the trend is very establish and on billing as I've said, we're assuming at this point in time something consistent with what we've seen in the previous quarters.

Mr. Kartik: And we will see where we are at the end of the Europe, but.

Speaker Change: Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.

Mr. Kartik: If the economy rebounds, if the growth is a bit stronger than what is expected by economist and our card members are optimistic and keep spending.

Moshe Ari Orenbuch: Great. Thanks. And many of my questions have been asked and answered, but I'm hoping to follow up on a comment that you had just made about the pay over time. Talk a little bit more about the characteristics of that.

Mr. Kartik: I'd be I'd be delighted to have a higher bill business will report.

Mr. Kartik: Thank you. The next question is coming from Dominic Gabriel of Oppenheimer <unk> co. Please go ahead.

Moshe Ari Orenbuch: You mentioned that obviously that's going to, you know, tenured charge card customers. So the quality is very strong. Talk a little bit about the yield and how much. Thanks for watching!

Mr. Kartik: Hey, good morning, Steve and Chris. Thanks, So much for taking my question.

Mr. Kartik: I was just curious about the total card growth I mean, we all know that you've seen some really excellent account acquisitions over the last number of years, but I was just curious about total card growth versus proprietary carded forest growth in particular this quarter.

Speaker Change: So your description is correct, Moshe. It's a facility that we attach to our Shawshkot products where customers can decide if they want to revolve a portion of their bill. This is the fastest growing category for us in terms of loan growth. It was very well received by the customers.

Speaker Change: And I don't know what else I can tell you. Remember that their charge card has no preset limit, which is an important feature here. So it's a way for us to give them money as well, and it's a painful product.

Mr. Kartik: If there is any if there is any.

Dominic Gabriel: Color you can provide on why that may diverge or what the strategy is between maybe having more proprietary cards as a percentage of total cards anything on that would be excellent. Thanks. So much.

Speaker Change: So it's a way for us to give them a facility where they can, you know, revolve over a period of time. And as I said previously, their credit profile is very strong for this product, very much because it is attached to a very premium base, right? Your premium gold card members are using this facility and revolving from time to time. Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Dominic Gabriel: Yes.

So.

Dominic Gabriel: We have about 100 140 million cards.

Dominic Gabriel: Can transact on.

Dominic Gabriel: On our network on our network out of the 140 million cars about AED are issued by American Express that's what we call the proprietary cards.

Dominic Gabriel: They represent the bulk of the spend.

Dominic Gabriel: And they drive the very vast majority of our economy.

Sanjay Sakhrani: Thank you. Um, maybe I could ask the questions regarding what's embedded in the revenue growth expectations for 2024 differently. If we look at the fourth quarter exit run, would that sort of target us to the low end of the guidance range? And then, Christoph, you mentioned that lower rates shouldn't help, but aren't you guys liability sensitive on the charge card portfolio? So let me take the second question first. We are slightly liability-sensitive.

Dominic Gabriel: From a growth rate standpoint.

Dominic Gabriel: If you look at cars and <unk>.

Dominic Gabriel: Youll see that in the detail of our disclosures, they're proprietary cards in force are up 5% year over year and the total cause enforced so including their cards issued by network partners is up 6%.

Dominic Gabriel: Does it answer your question.

Sanjay Sakhrani: And the key assumption for us, but the comment remains that, you know, in its totality, our total balance sheet and total funding stack level, the impact of rate cuts is going to be very small on our NII. The big unknown here is what's going to happen to the beta. We've been

Very much I really appreciate that I have a good day.

Dominic Gabriel: You.

Thank you. The next question is coming from Aaron.

Sal Martinez: <unk> of Citi. Please go ahead.

Sal Martinez: Thanks.

Sal Martinez: Maybe you could I was wondering if you could talk about the plans for the next platinum refresh in the U S. I think the last one.

Sanjay Sakhrani: As an industry trending around 0.7 on its way up, we're probably going to trend to 0.7 on the way down, but not immediately. And it's hard to say exactly at this point in time where we're going to be when the Fed starts cutting rates. We are making assumptions that we think are conservative, but we don't know for sure, and we'll see where we are. So there is a bit of uncertainty here, but what you know for sure is that you should not expect a big impact or NII depending on the rate curve.

2021.

Sal Martinez: And whether or not.

Sal Martinez: Do you have any plans to do that this year.

Sal Martinez: In your guidance for the year as well.

Yes so.

Sal Martinez: As you know we have.

Sal Martinez: Committed to refreshing 40 products this year as Christophe has said and strategically.

Sal Martinez: We look at refreshing all of our products on a sort of three to four year basis.

Sal Martinez: And it's important because it's really important to make sure that we keep our products fresh we're listening to our customers and putting in.

Sanjay Sakhrani: Going back to your first question around revenue, you know, I just, I don't have a lot to say on top of what I said earlier and what I said in my prepared remarks. I'm happy to be surprised on the upside if bill business is stronger. Car fees, we have good visibility.

Sal Martinez: Those enhancements and the extra value that they want and it enables us.

Sal Martinez: To make sure from a generational perspective.

Sal Martinez: We are modifying those products.

Sanjay Sakhrani: NII, I think the trend is very established. And on billing, as I said, we are assuming at this point in time something consistent with what we've seen in the previous quarters. And we'll see where we are at the end of the year.

Sal Martinez: As trends change and as our customer needs change.

Sal Martinez: As far as specifically.

Sal Martinez: The platinum card.

Sal Martinez: Really pre announcement.

Sal Martinez: And so I think youll just have to wait and see.

Sanjay Sakhrani: But if the economy rebounds, if the growth is a bit stronger than what is expected by economists and our town members are optimistic and keep spending, I'd be delighted to have a higher bill business to report. Thank you. The next question is coming from Dominic Gabriel of Oppenheimer & Co. Please go ahead. Hey, good morning, Steve and Christophe.

Speaker Change: Thank you. The next question is coming from Craig Maurer of Ft Partners. Please go ahead.

Speaker Change: Good morning. Thanks.

Speaker Change: Two quick questions.

Speaker Change: But.

Speaker Change: Considering the strength of Delta Airlines over the last number of years.

Speaker Change: Consistently the top airline.

Speaker Change: You've clearly benefited a lot from that in terms of new card issuance and likely spend as they have been able to hold fares better.

Dominic Gabriel: Thanks so much for taking my question. I was just curious about the total card growth. I mean, we all know that you've seen some really excellent account acquisitions over the last number of years, but I was just curious about total card growth versus proprietary card enforced growth, particularly this quarter. If there's any color you can provide on why that may diverge or what the strategy is between maybe having more proprietary cards as a percentage of total cards, anything on that would be excellent. Thanks so much.

Speaker Change: We see airlines spend slow does that benefit diminish.

Speaker Change: And is it something you have to think about.

Speaker Change: And second in terms of small business, we've been pretty flat now for a couple of quarters curious what you're seeing under the covers there is this.

Speaker Change: Are you still able to issue new cards or.

And are you seeing any reluctance from small business to take additional products that might increase their costs beyond the baseline I'm just trying to understand the move better small business owners.

Speaker Change: So from a small business perspective.

Speaker Change: Yeah. So, we have about 140 million cards that can transact on our network. Out of the 140 million cards, about 80 are issued by American Express.

Speaker Change: The drive is really organic spend we're not seeing existing small businesses spend more than they spent the year before and thats not an American express phenomenon that is an industry phenomenon as.

Speaker Change: That's what we call the proprietary card. They represent the bulk of the spend, and they drive the very vast majority of our economy. From a growth rate standpoint, if you look at cars in force, and you'll see that in the details of our disclosures, the proprietary cars in force are up 5% year over year, and the total cars in force, so including the cars issued by network partners, are up 6%. Does that answer your question?

As far as card acquisition within small businesses that still remains strong as far as small businesses looking at our platform and looking at our loans and so forth that remained strong and the credit quality remains strong I think as Christoph said in his.

Speaker Change: <unk> there is this phenomenon.

Speaker Change: Of inventory buildup.

There is some interest rate shock and so forth and so.

Speaker Change: Small businesses tend to be very very secular.

Speaker Change: Would be.

Speaker Change: Much more concerned if we werent acquiring cards, if we werent engaging a new small businesses Laurie.

Speaker Change: Thank you very much. I really appreciate that. Have a good day.

Speaker Change: Write offs and delinquencies were higher so at the moment as we look at this we truly believe this is an organic spending issue and it's not American express.

Speaker Change: Thank you. Thank you. The next question is coming from Arren Cyganovich of Citi. Please go ahead.

Speaker Change: Specific I'll, let Christophe talk a little bit about delta.

Arren Cyganovich: I was wondering if you could talk about the plans for... you have it. Yeah, so, um, as you know, we have committed to refreshing 40 products this year, as Christophe has said, and strategically. We look at refreshing all of our products on a three to four-year basis. And it's important because it's really important to make sure that we keep our products fresh; we're listening to our customers and putting in those enhancements and the extra value that they want and enable us. To make sure, from a generational perspective, we are modifying those products, uh, as trends change and as our customer needs change. As far as specifically, for the platinum card, we don't really pre-announce that, and so I think you just have to wait and see. Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Speaker Change: So the delta.

Speaker Change: Product.

Speaker Change: Is still growing very very strong.

Christopher Brendler: The total billing growth on the Delta products for the full year was up 15%.

Christopher Brendler: And <unk>.

And we are originating a lot of new cars as well.

My comment about.

Christopher Brendler: Softness in terms of.

Christopher Brendler: Q4.

Christopher Brendler: Hard to say, whether it's the beginning of a trend or whether it's just a blip time will tell.

Christopher Brendler: But it's still growing very very strong and the engagement with with the partner with a partner is very strong. The partnership is going strong. So I don't see any softness there at all and.

Christopher Brendler: And Peter I will say as well that the credit quality of those new card members remain very strong that made comments about this one of the fastest growing.

Peter I: Segment on the loan side and it comes with very strong performance people, who travel a lot in new Flyer law tend to have strong credit quality and we see that on the loan side on the expense side on the origination side, so I'm not I'm not worried about about that at this stage.

Craig Jared Maurer: Yeah, good morning. Thanks. I have two quick questions.

Craig Jared Maurer: You know, considering the strength of Delta Airlines over the last number of years, it's consistently the top airline, you've clearly benefited a lot from that in terms of new card issuance and likely in spend as they've been able to hold fares better. But as we see airlines spend slow, does that benefit diminish, and is it something you have to think about?

Peter I: Thank you our final question will come from Mihir Bhatia of Bank of America. Please go ahead.

Mihir Bhatia: Hi, Thank you for squeezing me in here I just wanted to go back a little bit and maybe just unpack the.

Craig Jared Maurer: And second, you know, in terms of small business, you know, we've been pretty flat now for a couple quarters. Curious what you're seeing under the covers there is this. Are you still able to issue new cards or, And, you know, are you seeing any reluctance from small businesses to take, you know, additional products that might increase their costs beyond the baseline? I'm just trying to understand the mood better of small business owners. Thanks. Yeah. So from a small business perspective, the drive is really organic spend. We're not seeing existing small businesses.

Mihir Bhatia: Billings growth a little bit maybe can you just talk about how much of that is being driven by adding new card members versus winning wallet share and then just related to that same topic. Because just how are you thinking about the environment for new card acquisitions is this $3 million level that you have been at for the last couple of quarters. The right level to think about for the next year.

Mihir Bhatia: I understand that is dynamic and you will change, but what have you assumed in your planning.

Mihir Bhatia: Yes, let me.

Mihir Bhatia: Let me talk about sort of the.

Card acquisition numbers.

Mihir Bhatia: When we go out and we look at acquiring card members, who really focus on acquiring billed business and we acquire.

Speaker Change: Spend more than they spent the year before, and that's not an American Express phenomenon. That is an industry phenomenon. As far as card acquisition within small businesses is concerned, that still remains strong. As far as small businesses are looking at our platform and looking at our loans and so forth, that remains strong, and credit quality remains strong. I think, as Christoph said in his remarks, there is this phenomenon of inventory buildup, there's some interest rate shock, and so forth. And so small businesses tend to be very, very secular.

Mihir Bhatia: We acquired revenue.

Mihir Bhatia: And.

Mihir Bhatia: Consistently now if you take the first quarter out of last year, where it was a little bit more of an anomaly of $3 4 million cards, we've been around that three to $2 nine.

And we will as long as we have line of sight into hi.

Mihir Bhatia: Credit quality premium card members, we will continue to be out there aggressively acquiring card members and that range will be where we see that range. Today between 2931, we don't really provide any guidance on that but with the amount of money we're planning on spending.

Speaker Change: I would be much more concerned if we weren't acquiring cards, if we weren't engaging in new small businesses, or if write-offs and delinquencies were higher. So, at the moment, as we look at this, we truly believe this is an organic spending issue, and it's not American Express-specific. I'll let Christophe talk a little bit about Delta. Yeah, so the Delta product is still going very, very strong. The total billing growth on the Delta product for the full year was up 15%.

Mihir Bhatia: I think thats a.

It's a pretty fair assumption and we report that but what we really focus on is making sure that we're getting.

Mihir Bhatia: Billed business acquired.

Mihir Bhatia: When you look at the composition.

Mihir Bhatia: Obviously in a stronger and stronger environment, you're really looking for more organic growth from your existing cardholders and I just made the comment before.

Mihir Bhatia: Where small businesses, that's not what we're seeing and so when you look at any growth that youre seeing from small business perspective that is truly from new new cardholders required.

Christophe Lacayac: And we are originating a lot of new cars as well. My comment about their softness in terms of Q4 is hard to say whether it's the beginning of a trend or whether it's just a blip; time will tell. But it's filtering very, very strong, and the engagement with the partner is very strong; the partnership is going strong. So I don't see any softness there at all, and I will say as well that the credit quality of those Nucon members remains very strong. I've made comments about it being one of the fastest growing segments on the loan side, and it comes with very strong performance. People who travel a lot and fly a lot tend to have strong credit quality, and we see that on the loan side, on the spend side, on the origination side.

Mihir Bhatia: And a lot of the growth from a consumer perspective, right now is new cardholders acquired.

Mihir Bhatia: Which actually.

Mihir Bhatia: As we think about engaging with our card holders.

Mihir Bhatia: Give me a lot of confidence going forward, because as we continue to engage and not only get more wallet share, but as our card members get back to where they were probably before the third and fourth quarter. We believe there is upside there from a from a billings perspective.

Mihir Bhatia: Talked a lot about <unk>.

Mihir Bhatia: Millennials overtime.

Mihir Bhatia: <unk>.

Mihir Bhatia: We get on this growth trend, we get on this trajectory with these millennials and Gen Z years, where we start with a higher share of wallet.

Christophe Lacayac: So, you know, I'm not worried about that. Thank you. Our final question will come from Mihir Bhatia of Bank of America. Please go ahead.

Mihir Bhatia: And we start with that higher share of wallet.

Mihir Bhatia: Because they are used to using their American express card everywhere.

Mihir Bhatia: Hi, thank you for squeezing me in here. I just wanted to go back a little bit and maybe just unpack the billing growth a little bit. Can you just talk about how much of that is being driven by adding new card members versus winning wallet share? And then, related to that same topic, just how are you thinking about the environment for new card acquisitions? Is this 3 million level that you have been at for the last couple of quarters the right level to think about for the next year?

And as they move through their life cycles.

Mihir Bhatia: Their wallets increase and so we have a lot of confidence in the long term lifetime value.

Mihir Bhatia: The millennial base and of the of the Gen Z base that we're now acquiring in UC and even in this fourth quarter.

Mihir Bhatia: That is 32% now of our total spending so.

The way to think about this right now is a lot of the growth is coming that youre seeing is coming from new card acquisition.

Mihir Bhatia: I understand that it's dynamic and you'll change, but what have you assumed in your plan? Let me, let me talk about some sort of card acquisition numbers. You know, when we go out and we look at acquiring card members, we really focus on acquiring, building business, and acquiring revenue, and you know, consistently now, if you take the first quarter out of last year, where it was a little bit more of an anomaly of 3.4 million cards, we've been around that 3 to 2.9. And we will, as long as we have a line of sight into high-credit quality, premium card members, we will continue to be out there aggressively acquiring card members, and you know that range will be where we see that range today between 2.9 and 3.1. We don't really provide any guidance on that, but with the amount of money we're planning on spending, I think that's a pretty fair assumption and we report that, but what we When you look at the composition, obviously, in a stronger environment, you're really looking for more organic growth from your existing cardholders, and I just made the comment before, where small businesses. That's not what we're seeing.

Mihir Bhatia: But there will be an organic step up as the economy gets better so.

Mihir Bhatia: And at <unk>.

Mihir Bhatia: That gives us a lot of confidence.

Mr. Kartik: How we are positioned for future growth over the long term, which gives us confidence to say aspirational Lee we should be a 10% plus revenue company and Thats why you see the guidance that we've given this year and both from a revenue perspective, any EPS perspective.

Mr. Kartik: With that we will bring the call to an end. Thank you for joining today's call and for your continued interest in American Express the IR team will be available for any follow up questions.

Mr. Kartik: Later to you.

Mr. Kartik: Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at IR got American Express Dot com. Shortly after the call. You can also access a digital replay of the call at 8776606853 or.

Mr. Kartik: 0161 to 7415.

Mr. Kartik: This code 1374.

Mr. Kartik: Three to four zero after one P M. Eastern time on January 26th through February 2nd.

Mr. Kartik: That will conclude our conference call for today. Thank you for your participation you may now disconnect.

Mihir Bhatia: And so when you look at any growth that you're seeing from a small business perspective, that is truly from new new cardholders acquired, and a lot of the growth from a consumer perspective right now is new cardholders acquired, which actually, as we think about engaging with our cardholders, gives me a lot of confidence going forward, because as we continue to engage and not only get more wallet share, but as our court members get back to where they And, you know, we've talked a lot about millennials over the last few years. And, you know, when we get on this growth trend, we get on this trajectory with these millennials and Gen Zers, where we start with a higher share of the wallet. And we start with that higher share of wallet because they're used to using their American Express cards everywhere. And as they move through their life cycles, their wallets increase.

Mr. Kartik: Okay.

Mr. Kartik: All for today. Thank you for your participation you may now disconnect.

Mihir Bhatia: And so we have a lot of confidence in the long-term lifetime value of the Millennial base and of the Gen Z base that we're now acquiring. And you see, even in this fourth quarter, that is 32% now of our total spending. So, you know, a way to think about this right now is that a lot of the growth that you're seeing is coming from new card acquisition. But there will be an organic step up as the economy gets better.

Speaker Change: So that gives us a lot of confidence about how we're positioned for future growth over the long term, which gives us confidence to say, aspirationally, we should be a 10% plus revenue company. And that's why you see the guidance that we've given this year, both from a revenue perspective and a... With that, we will bring the call to an end. Thank you for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you. Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415 using access code 1374. 3, 2, 4, 0 after 1 p.m. Eastern Time on January 26th through February 2nd.

Speaker Change: That will conclude our conference call for today. Thank you for your participation. You may now disconnect. 2018 The Ultimate Parody Site!! ! That's all for today. Thank you for your participation. You may now disconnect.